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Kiavi, a San Francisco-based provider of financing to house flippers and long-term real estate investors, is downsizing just weeks after offloading more than $200 million in loans to Wall Street investors.
The layoffs were first reported by HousingWire, which cited anonymous sources who said 39 employees were laid off Wednesday.
One of those sources reported that Kiavi CEO Michael Bourque told employees, “Because we are in the hard money space, we don’t have a lot of investors willing to buy our assets because of the rate hikes,” HousingWire reported.
Kiavi confirmed in a statement to Inman that it has laid off employees, but declined to comment on the number of workers let go or how many are still employed. Before the layoffs, the San Francisco Business Times reported on June 23 that Kiavi employed about 525 workers.
After Kiavi announced its latest securitization of $218 million in unrated residential transaction loans (RTLs) last month, Bourque told the San Francisco Business Times that the markets for such deals “are certainly tough right now.”
“We’ve built up a strong track record now with institutional investors, so obviously prices are changing and the markets are a bit different, but we’re very happy with the execution,” Bourque told the publication.
Founded in 2013, Kiavi makes short-term “fix and flip” bridge loans of up to $1.5 million available to qualified investors who can fund up to 90 percent of a home’s purchase price without having to verify their income, employment or assets. Kiavi also offers longer-term funding to investors who want to buy and hold one- to four-unit rental properties.
Kiavi said the company is adjusting to changing markets, but continues to offer loans to flippers and long-term investors, in its statement to Inman.
“We definitely have investors interested in buying our loans,” the statement said. “Fed rate hikes and uncertainties around recession, housing impacts are affecting a lot of asset classes, and bridge loans are not immune to those effects. We continue to adjust our credit and pricing prudently to address the changing markets and remain focused on serving our customers.”
“Kiavi is absolutely continuing to make business-purpose bridge loans without individual income and employment verification, as our loan decisioning is focused on evaluating the investment project,” the company said. “We are also continuing to make rental loans to real estate investors. We are focused on delivering outstanding products and services to our customers. The headcount reduction has not changed that.”
Mass layoffs at two “non-QM” lenders — Sprout Mortgage and PIMCO-backed First Guaranty Mortgage Corp. — have raised questions about a small but growing corner of the mortgage business that largely serves self-employed borrowers.
Because non-Qualified Mortgage loans don’t have the backing of mortgage giants Fannie Mae and Freddie Mac, they can be harder to bundle up into mortgage-backed securities for sale to investors who fund most U.S. home loans.
The securitization announced by Kiavi on June 22 was the ninth such deal since 2019, the company said. Because the securitization included a two-year revolving period during which principal payoffs can be reinvested in purchasing additional newly originated loans, the deal was expected to support up to $750 million in loan originations.
In May, Kiavi said it had funded more than $10 billion in loans for more than 46,000 projects through March 31.
After expanding into Alabama, Arkansas, Indiana, Kansas and Wisconsin this year, Kiavi said it was operating in 32 states and Washington, D.C.
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